• AA&S second quarter 2021 sales decreased 30% compared to the first quarter 2021 and were 33% lower year-over-year, due primarily to impacts from the strike, as well as the ongoing exit from the standard stainless sheet market. Segment sales to the defense markets were up 7% versus the first quarter 2021.
• AA&S segment EBITDA was $36.0 million, or 11.4% of sales. Strike-related costs of $38.2 million, primarily related to lower productivity and utilization levels, were excluded from AA&S segment second quarter 2021 results. Raw material price changes were a $6 million smaller EBITDA benefit compared to the first quarter 2021. Improved EBITDA margins compared to the second quarter of 2020 reflect a richer product mix, including a smaller proportion of standard stainless products, a $15 million benefit from raw material price changes and benefits from 2020 cost reductions.

Corporate Items and Cash

• Strike-related costs were $40.3 million in the second quarter 2021, and were excluded from segment results. These items primarily consisted of overhead costs recognized in the period due to below-normal operating rates, higher costs for outside conversion activities, and ongoing benefit costs for striking employees.
• Restructuring charges for the second quarter 2021 were a net credit of $6.2 million, primarily related to lowered severance-related reserves based on higher expected operating rates and revised workforce reduction estimates. Restructuring charges of $16.7 million for the second quarter 2020 related to voluntary and involuntary severance programs.
• Corporate expenses in the second quarter 2021 were $15.9 million, compared to $7.2 million for the prior year quarter. The current year increase includes a $6.3 million impact of higher incentive compensation costs compared to the prior-year period, which included reversals of previously recognized expense due to COVID-19 pandemic impacts.
• Closed operations and other expenses in the second quarter 2021 were $3.6 million, compared to $2.7 million of income in the prior year period. Prior-period results included benefits from settlements of contract indemnity obligations.
• Prior-year results included a $287 million goodwill impairment charge for the partial impairment of goodwill at our Forged Products business, and $21.5 million of debt extinguishment charges on the repurchase of a portion of the 2022 convertible notes.
• Second quarter 2021 results include $4.0 million of income tax expense, primarily related to foreign operations. Second quarter 2020 results included a $99 million valuation allowance on ATI's U.S. deferred tax assets. ATI maintains a valuation allowance on its U.S. deferred tax assets and does not expect to pay any significant U.S. federal or state income taxes for the next several years due to net operating loss carryforwards.
• Cash on hand at June 30, 2021 was $472.5 million, and available additional liquidity under the asset-based lending credit facility was approximately $350 million. For the first half 2021, cash used in operating activities was $102.6 million, primarily due to an $115.0 million increase in managed working capital related to higher operating levels in most operations. Cash used in investing activities for the first half of 2021 was $58.8 million, primarily related to capital expenditures.

Outlook

"Looking forward to the third quarter, we anticipate continued recovery in our jet engine market driven by increasing narrow body aircraft production rates as well as ongoing strength in our energy and electronics end markets" said Wetherbee. "While we expect lingering effects on the SRP business, production will ramp back toward pre-strike levels across the balance of the third quarter.  Despite this near term-headwind, the ongoing global economic recovery is gradually expanding and providing optimism for our most impactful end markets." 

Allegheny Technologies will conduct a conference call with investors and analysts on Tuesday, August 3, 2021, at 8:30 a.m. ET to discuss the financial results. The conference call will be broadcast, and accompanying presentation slides will be available, at ATIMetals.com. To access the broadcast, click on "Conference Call". Replay of the conference call will be available on the Allegheny Technologies website.

This news release contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Certain statements in this news release relate to future events and expectations and, as such, constitute forward-looking statements. Forward-looking statements, which may contain such words as "anticipates," "believes," "estimates," "expects," "would," "should," "will," "will likely result," "forecast," "outlook," "projects," and similar expressions, are based on management's current expectations and include known and unknown risks, uncertainties and other factors, many of which we are unable to predict or control. Our performance or achievements may differ materially from those expressed or implied in any forward-looking statements due to the following factors, among others: (a) material adverse changes in economic or industry conditions generally, including global supply and demand conditions and prices for our specialty metals; (b) material adverse changes in the markets we serve; (c) our inability to achieve the level of cost savings, productivity improvements, synergies, growth or other benefits anticipated by management from strategic investments and the integration of acquired businesses; (d) volatility in the price and availability of the raw materials that are critical to the manufacture of our products; (e) declines in the value of our defined benefit pension plan assets or unfavorable changes in laws or regulations that govern pension plan funding; (f) labor disputes or work stoppages; (g) equipment outages and (h) business and economic disruptions associated with the currently ongoing COVID-19 pandemic or other similar widespread public health crises that may arise in the future and (i) other risk factors summarized in our Annual Report on Form 10-K for the year ended December 31, 2020, and in other reports filed with the Securities and Exchange Commission. We assume no duty to update our forward-looking statements.